Nexus
What are the two main types of sales tax nexus?
Physical Presence Nexus
Economic Nexus
Name 3 types of customer exemptions.
Charitable/Exempt Organization
Federal/State/Municipality Government
Industrial Producers/Manufacturers
Reseller
What is the typical factor-based nexus threshold?
(1) $50,000 of property;
(2) $50,000 of payroll;
(3) $500,000 of sales; or
(4) 25% of total property, total payroll, or total sales.
What is our client mission statement? “To be: ________, ________, _______”
Responsive, Trusted, Advisors
Can travel into a state establish nexus? Explain.
Yes. Most states don't have brightline threshold. 3-5 days is standard BT position. Can increase days in some cases.
Where in the Q drive is the matrix showing the sale-for-resale exemption certificates accepted by each state?
Q:\Research\Resale Certificates
Explain the apportionment factor.
The Apportionment factor calculates the proportion of business done in particular state
Name our research platforms.
Thomson Reuters Checkpoint
ATR
Bloomberg Tax
CCH AnswerConnect
Does paying commissions to a third-party for customer referrals establish nexus? Explain.
Yes. See Tyler Pipe. Take into account de-minimis
Explain the difference between custom software and customization of prewritten software.
Custom Software - built specifically for one specific customer
Customization of Prewritten Software - software that is generally the same for all customers but allows certain configurations/modifications to be made to fit a customer's specific needs
Explain the difference between cost of performance and market-based sourcing.
“Cost of Performance” (COP) method - Sourced to location where costs for performing the services occurred (i.e., location of employee)
“Market based” method - Sourced to location where customer receives benefit of the service
Give a one-sentence pitch (to a fictitious customer) for SMART Compliance.
open response
Does inventory you own that is in a third-party warehouse establish nexus?
Yes. Check for any ongoing state litigation.
Explain the difference between data processing and SaaS
Data processing - Client ingests data (usually through API connection), analyzes or converts data and provides "answer" or other reports
SaaS - A customer pays for a license to remotely-access, usually through a web-browser, and use/manipulate the provider's software which is hosted by the provider or third-party.
Explain our position on when a taxpayer likely establishes (income tax) economic nexus.
Statutes are often worded very broadly. Advise clients that they likely have income tax economic nexus if have more than $500k of sales to a state
Put the following in the proper order of authority:
Statutes
Administrative Guidance (e.g., Letter Rulings)
Case Law
Regulations
1, 3, 4, 2